Brokerage firm Motilal Oswal Institutional Equities has a "buy" call on the stock of Sun TV with a price target of Rs 500 on the stock. The shares of Sun TV are currently trading at Rs 400, thus implying an upside potential of nearly 25 per cent from current levels.
According to the brokerage firm Subscription growth of un TV looks steady on account of healthy TV viewership and lucrative growth in Sun NXT OTT, especially in the southern regional markets, which could add to subscription revenue.
Motilal Oswal also believes that ad spends have seen good recovery since Jul'20, while overall ad revenues are expected to fall 24% in FY21E due to a drop in consumption and discretionary spends.
"We upgrade our revenue/EBITDA/PAT estimate by 7%/9%/4% for FY21E and by 4%/8%/13% for FY22E, factoring IPL revenues in FY21 and better subscription revenues in FY21E and FY22E. We factor revenue/EBITDA/PAT growth of 6%/7%/9% over FY20-22E. Sun TV has a better liquidity position with Rs 3 billion in cash. This would help it maintain a stronger position in the current lockdown crisis and invest strongly in the Sun NXT platform.
Sun TV trades at FY21E/FY22E EPS of 12.8x/9.7x. We value Sun TV at FY22E P/E of 12x on account of: a) a muted ad spend outlook in the economy and b) the looming threat to subscription revenues from NTO 2.0. Thus, we arrive at target price of Rs 500. Maintain Buy," the brokerage firm has stated.